Budget Approved; Requires $300 Million in Loans

Despite receiving no support from the political opposition, the draft national budget for 2009 was easily passed by the National As­sem­bly on Tuesday after a second day of spirited debate.

Eighty-one of the 95 lawmakers present raised their hands in favor of the $1.8 billion draft budget, but only after a four-hour debate that re­volved largely around the government’s acquisition and use of loans from foreign donors. Opposition law­­makers also reiterated their concerns from Monday’s debate about the balance between de­fense and security spending, and funding earmarked for social programs.

Speaking before the Assembly, fi­nance commission chairman Cheam Yeap said the government, to meet its budgetary needs, would be seeking $300 million in loans. The CPP lawmaker did not give de­tails as to where those loans might come from or the terms under which the money would be lent.

The government is seeking the loans despite donors having last week pledged a record amount of foreign aid for 2009. However, those monies are not taken into con­sideration in the draft budget passed Tuesday, and donors typically don’t give funding directly to the government.

SRP lawmaker Son Chhay ex­pressed the need for caution in ac­quiring loans, recommending that any such loans be individually ap­proved ahead of time by the Na­tion­al Assembly—a practice he said was common between 1993 and 1997.

“Every loan request must go to the National Assembly,” he said.

Further words of caution were offered by SRP lawmaker Yim Sovann, who said that some do­nor nations give money or loans with the expectation of gaining greater access to Cambodia’s natural re­sources, such as oil.

Both opposition lawmakers said that if such loans are to be taken out, they must be put toward useful and properly constructed infrastructure projects that will generate further wealth down the line.

“The government should use the money from the loan to build achievements that can speed up the economy and not take a loan to construct buildings that present no benefits, like the [new] Council of Ministers building,” Son Chhay said, adding that many infrastructure projects the state has undertaken were of poor quality and started crumbling in just a year’s time.

Finance Ministry Secretary of State Ouk Rabun, who attended the session to defend the draft budget, said the need for loans was inevitable.

“We are a least-developed country; we need to take a loan,” he said, adding that money loaned to the government would be used for infrastructure projects.

At present, Cambodia’s total debt to foreign nations stands at $2.3 billion, Ouk Rabun said, adding that the country can safely pile up debt amounting to 30 percent of GDP. The International Monetary Fund projects Cambodia’s GDP will be in the neighborhood of $10.8 billion for 2008, putting the state’s total foreign debt at about 21 percent of GDP.

However, Cheam Yeap said that Russia—the country’s largest creditor—has already committed to canceling 70 percent of $1.5 billion owed by Cambodia.

Seeking World Trade Organiz­a­tion membership, Russia must make bilateral trade agreements with all other WTO members, putting Cambodia in an advantageous bargaining position with regard to its debt.

Ouk Rabun told lawmakers that the government would seek As­sem­bly approval for its requested loans, but only as one large package. The state does not need to seek legislative approval for each individual loan, he said.

“It shouldn’t be complicated,” he said.

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